Four Pillars of Success for a Strong Portfolio.
FEATURES OF STRONG PORTFOLIO:
What make a healthy investor?
There are some good traits of portfolio which makes it better than others . A good and strong portfolio has some strong elements or parameters which it must meet . These are the Pillars for a strong Portfolio or Investments. Important Elements are :
1. Capital Appreciation
2. Liquidity
3. Risk Management
4. Goal Oriented
Lets take each of these points one by one :
Capital Appreciation
This is one of the biggest reason to invest. Isn't it very obvious? Yes , it is . But the main point is not just its growth in numbers but its real worth . We are talking about Post-tax and post inflation returns .The real return of Plain Fixed Deposits in these high inflation days are negligible when you factor out Inflation and tax .The best investment must be robust and good enough to provide appreciation in real worth over long period of time . Real Estate and Equity (Long term) can generate good returns
Liquidity
Another important aspect of a good portfolio is that its provide enough liquidity , so that in case of need , you can get the money .What is Liquidity ? Liquidity is how fast and easily asset can be sold and you can get cash . For example Mutual funds and Shares are highly Liquid , If you have them and want to sell, you can get the money soon . Where as Real estate is not a Liquid asset . So if you need urgent cash , you might not find right price and or buyer.Every portfolio must have some element of Liquidity, as per the requirement of the investor.
Risk Management
Every portfolio or investment must be to some level insured or have element of risk managementWhat do we mean by this? A good investor is one who sees beyond what an average investor cant see. Average investors concentrate very well on Profits , How good an investment can be , High returns etc. An exceptional investor goes beyond that and takes care of Worst case Scenarios and situations which may cause damage. He is the real investor .
Some of the steps to be taken are :
- Adequate Insurance to be taken .
- Proper monitoring of performance of investment.
- Getting out early in a bad investment and accepting that you made a wrong decisions.
- keep your self updated with news ,laws , things which can affect you investments .
Risk management is not buying some product for managing risk but being aware of things and taking right and logical decisions.
Goal Oriented
"A good investment is one which has a purpose"
Each and every investment should be done because of a strong reason . I see people who take Insurance policies to save tax at the last rush hour of the year !!! . Better loose the tax benefit and don't take that policy . That kind of investment is nothing more than a waste or burden. On the top of it these people don't even need insurance !!!
When someone asks you the reason for making a investment , you should know why you did it ?
Some of the bad or idiotic reasons for doing investments are :
- I can save tax by that
- My friend did it and recommended me
- Everyone is doing it .. why shouldn't I ?
Every time you take a decision ask yourself some questions like :
- Do i really need it at this point of time ?
- Can i afford it ?
- Do i understand it well ? Can i protect myself if people make me fool ?
- What is the purpose or goal of this investment ?
If you get satisfactory answers go for it else take an expert advice.
Summary
Each and every person portfolio should be strong on all the areas , it should pass all the criteria to some extent . A portfolio should pass all the parameters for different requirements . If you have a portfolio ask yourself all these questions :
- Is it good enough to provide stable and good returns over long term . Is capital appreciation happening in Value or just numbers are growing , but post-tax and post-inflation returns are negligible .
- If i require instant money within 2 hrs , 2 days or 5 days , Is my portfolio smart enough to provide me .
- Is my portfolio good enough to provide protection to me and my family against calamities or any unexpected events . Do i review my Portfolio in regular basis to cut out the losers .
- Is my portfolio a result of my Needs and requirements or Greed , Ignorance and Hearsay and emotional Buying ? If that's the case , take action !!!
Some I would be happy to read your comments !!!
There are some good traits of portfolio which makes it better than others . A good and strong portfolio has some strong elements or parameters which it must meet . These are the Pillars for a strong Portfolio or Investments. Important Elements are :
1. Capital Appreciation
2. Liquidity
3. Risk Management
4. Goal Oriented
Lets take each of these points one by one :
Capital Appreciation
This is one of the biggest reason to invest. Isn't it very obvious? Yes , it is . But the main point is not just its growth in numbers but its real worth . We are talking about Post-tax and post inflation returns .The real return of Plain Fixed Deposits in these high inflation days are negligible when you factor out Inflation and tax .The best investment must be robust and good enough to provide appreciation in real worth over long period of time . Real Estate and Equity (Long term) can generate good returns
Liquidity
Another important aspect of a good portfolio is that its provide enough liquidity , so that in case of need , you can get the money .What is Liquidity ? Liquidity is how fast and easily asset can be sold and you can get cash . For example Mutual funds and Shares are highly Liquid , If you have them and want to sell, you can get the money soon . Where as Real estate is not a Liquid asset . So if you need urgent cash , you might not find right price and or buyer.Every portfolio must have some element of Liquidity, as per the requirement of the investor.
Risk Management
Every portfolio or investment must be to some level insured or have element of risk managementWhat do we mean by this? A good investor is one who sees beyond what an average investor cant see. Average investors concentrate very well on Profits , How good an investment can be , High returns etc. An exceptional investor goes beyond that and takes care of Worst case Scenarios and situations which may cause damage. He is the real investor .
Some of the steps to be taken are :
- Adequate Insurance to be taken .
- Proper monitoring of performance of investment.
- Getting out early in a bad investment and accepting that you made a wrong decisions.
- keep your self updated with news ,laws , things which can affect you investments .
Risk management is not buying some product for managing risk but being aware of things and taking right and logical decisions.
Goal Oriented
"A good investment is one which has a purpose"
Each and every investment should be done because of a strong reason . I see people who take Insurance policies to save tax at the last rush hour of the year !!! . Better loose the tax benefit and don't take that policy . That kind of investment is nothing more than a waste or burden. On the top of it these people don't even need insurance !!!
When someone asks you the reason for making a investment , you should know why you did it ?
Some of the bad or idiotic reasons for doing investments are :
- I can save tax by that
- My friend did it and recommended me
- Everyone is doing it .. why shouldn't I ?
Every time you take a decision ask yourself some questions like :
- Do i really need it at this point of time ?
- Can i afford it ?
- Do i understand it well ? Can i protect myself if people make me fool ?
- What is the purpose or goal of this investment ?
If you get satisfactory answers go for it else take an expert advice.
Summary
Each and every person portfolio should be strong on all the areas , it should pass all the criteria to some extent . A portfolio should pass all the parameters for different requirements . If you have a portfolio ask yourself all these questions :
- Is it good enough to provide stable and good returns over long term . Is capital appreciation happening in Value or just numbers are growing , but post-tax and post-inflation returns are negligible .
- If i require instant money within 2 hrs , 2 days or 5 days , Is my portfolio smart enough to provide me .
- Is my portfolio good enough to provide protection to me and my family against calamities or any unexpected events . Do i review my Portfolio in regular basis to cut out the losers .
- Is my portfolio a result of my Needs and requirements or Greed , Ignorance and Hearsay and emotional Buying ? If that's the case , take action !!!
Some I would be happy to read your comments !!!
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